Record freeze in U.S. extending wheat crop damage

Global Benchmark

Even after this month’s rally, wheat has been in a bear market for much of the year. Kansas City futures dropped 22% from the closing high on Sept. 14, mostly on expectations that the drought would end and global grain supply will increase later in 2013. Prices on the Chicago Board of Trade, the global benchmark, tumbled 26% from a peak on July 20.

While cold weather and drought hurt crops in western Kansas, farmers in the eastern two-thirds of the state and in Oklahoma won’t abandon fields because most got enough moisture and avoided freezes, said Bill Spiegel, a spokesman for the Manhattan, Kansas-based industry group Kansas Wheat. Should rain fall and temperatures moderate, even those with damaged fields may harvest a “decent” amount of grain, he said.

‘Decent Crop’

A decline in supply may reverse a six-month, 7.1% slide in global cereal costs tracked by the United Nations’ Food & Agriculture Organization. The Rome-based group anticipates a 4.4% increase in wheat production to 690 million tons this year, led by the 27-nation European Union and the nine- country Commonwealth of Independent States.

Hedge funds are getting less bearish, trimming their net- short position in Chicago futures and options to 27,178 contracts in the week ended April 16 from 49,223 in February, U.S. Commodity Futures Trading Commission data showed on April 19.

A rally in prices may increase costs for companies from Mexico City-based Grupo Bimbo SAB, the largest bread maker, to General Mills Inc., the owner of the Wheaties cereal brand. The Minneapolis-based company’s grain-price hedging program extends to the end of the fiscal year on May 31, Chief Financial Officer Donal Leo Mulligan said on a March 20 conference call.

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